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Wednesday, September 20, 2006

New Respect For Microsoft (MSFT)(GOOG)(SNE)(AAPL)(YHOO)

Over the last three months, Microsoft’s stock has outperformed Google’s. By a lot. The ancient software company has had a 20% rise in its stock. Google is up about 5% over the period.

It may be that investors are seeing that, even though Microsoft’s main businesses of operating systems and server software don’t grow as fast as they once did, the company has other division that are actually starting to produce results. Xbox has begun to show tremendous promise especially against Sony’s Playstation. According to the company, it sold 1.7 million of the game consoles in the fiscal third quarter. As internet advertising rises, MSN is benefiting as well. It may be third in search behind Yahoo! and Google, but its overall traffic makes it one of the largest web properties in the world. In May, ComScore reported that the MSN-Microsoft sites had a total of 539 million unique visitors in March 2006. Google was second with 496 million, and Yahoo! third with 480 million. In a ranking of pageviews for the month, Yahoo! was first, followed by Google, and MSN-Microsoft sites.

Of course, Microsoft has prospects which may be more exciting than they have been for several years. The company is about to launch the newest version of its OS, Vista. It is introducing its new Zune player to compete with the iPod from Apple. And, it has occurred to the software giant that it has to deliver its products over the web, something that Google has already begun.

By contrast, Google has gone into a number of businesses, but only makes money selling advertising related to search results. Its mail, calendar, photo sharing, video and checkout offerings have yet to produce any financial yield. Whether they will is open to question. And, the advertising business related to search will probably not double each year for Google. Yahoo!’s collapse when it warned about its results is a clear sign that Wall St. is concerned about future growth of internet-only businesses.

Perhaps, now, Microsoft will get some respect.

Douglas A. McIntyre can be reached at Be does not own securities in companies that he writes about.

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